Gold Standard-Bretton Woods Flashcards
When/how did the gold standard begin?
In 1819, when the British Parliament repealed long-standing restrictions on the export of gold coins and bullion from Britain.
What was the British Pre-War Parity, and why was it bad for the economy?
The Bank of England began purchasing and selling gold at the rate before the Napoleonic Wars. Arbitrageurs were able to buy gold from the BOE for a low price and sell it high on the open market, and England experienced a contraction of the money supply, deflation, and an economic contraction.
What was the Bank Charter Act, and when was it passed?
The Bank Charter Act, passed in 1844, established that Bank of England notes, fully backed by gold, were the ONLY legal tender.
When/what was the Long Depression, and how was it started?
The Long Depression lasted from 1873-1896, and it was triggered by the US ending bimetalism: the law that allowed both silver and gold to be legal tender. This collapsed the price of silver and the value of silver mines, and forced a contraction of the US money supply.
What was the Coinage Act, and when was it passed?
The Coinage Act of 1873 ended bimetalism.
What was the Resumption Act, and when was it passed?
The Resumption Act of 1875 allowed greenbacks to be exchanged for gold and returned to the pre-war price of gold.
When did the US temporarily return to gold?
1919
By 1932, which two countries had amassed the most gold? Why was this bad?
The US and France- they had about 70% of the world’s gold. This meant that other countries had to use contractionary monetary policies, contributing to the global financial crisis.
What was the Smoot-Hawley Tariff Act? What were its side effects? What did other countries do in response?
It was an act that raised tariffs in an attempt to contain demand at home. It ended up reducing employment in our trade partners, and cut imports by 75%. Many other countries also raised tariffs, and this made the contraction worse.
What did Roosevelt do in response to the depression?
From 1933-34, he combated the contractionary monetary policy with expansionary monetary policy, which raised the price of gold.
What happened at Bretton Woods?
In June 1944, 44 countries agreed to peg their currencies to the US Dollar, which in turn was pegged to the price of gold at $35/ounce. They also established the International Monetary Fund.
What triggered the 1873 US stock market collapse?
The failure of the banking house Jay Cooke and Co. They couldn’t meet their obligations, causing a run on the bank, and panic ensued..
What was the Cross-of-Gold speech, and who gave it? What was the outcome?
William Jennings gave the speech, and he pressed the government to return to the bi-metal standard. He lost, and the 1900 Gold Standard Act was passed.
What were greenbacks, and who created them?
Lincoln created greenbacks that were backed by gold. Later, in 1862, unbacked treasury notes but were declared legal tender. These were allowed to float on foreign exchange markets.
On what did Winston Churchill insist?
He insisted on returning to the pre-war parity in 1925, and began contractionary monetary policy.
